I can't duplicate your problem here. On all my FC5 systems, the terminal opens
in $HOME only when opened from a desktop right-click or on the user's home
folder. If I right-click any other folder and choose "Open in Terminal," the
resulting terminal is started with $PWD in that folder. Please reopen with some
relevant debugging and/or the steps you followed if you can find someone else
who can duplicate this behavior.

The problem only appears, if there is already a gnome-terminal open,
otherwise "Open In Terminal" works as expected (for the first terminal).
In "Preferred Applications" I select "GNOME Terminal" which has
a config for "Command:" such that "gnome-terminal --working-directory=%f".
If I change to "Custom" and remove "--working-directory=%f",
nautilus-open-terminal works as expected.
Maybe something other breaks, I don't know.

Current nautilus-open-terminal releases have not used the '--working-directory'
hack for some time, since the product now uses the nautilus URI for opening
folders. There is no clean way to override old user customizations, however.
As you have discovered, users can always revert their personal settings and the
extension behaves as expected.

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